Spending on the state's landmark health insurance
initiative would rise by more than $400 million next year, representing
one of the largest increases in the $28.2 billion state budget the
governor proposed yesterday.

The biggest driver of the cost increase is projected growth in the
number of people signing up for state-subsidized insurance, which now
far exceeds earlier estimates....

"These increases are more than anticipated, so we absolutely have to
find ways to hold down the rate of growth in future years," said Michael
Widmer, president of the Massachusetts Taxpayers Foundation, a
business-funded budget watchdog that has supported the initiative.

This year the state is expected to exceed the initial budget for the
health insurance initiative by about $245 million, and next year's
budget would boost spending by another $400 million....

More than 70,000 have obtained Medicaid coverage since the law passed
expanding eligibility, and the cost for covering those additional
people, plus rate increases for hospitals, doctors, and others, is
projected to grow significantly above this year's spending.

Those who don't qualify for subsidies or Medicaid are expected to buy
private insurance or remain uninsured. Illegal immigrants are not
subject to the insurance mandate or eligible for state insurance, but
they can qualify for free care.

The subsidized insurance program at the heart of the state's
healthcare initiative is expected to roughly double in size and expense over the
next three years - an unexpected level of growth that could cost state taxpayers
hundreds of millions of dollars or force the state to scale back its
ambitions....

"The state alone cannot support that kind of spending increase," said Michael
Widmer, president of the Massachusetts Taxpayers Foundation, a business-funded
budget watchdog group....

"We're paying the price of our own success," said Widmer....

MassHealth covers the poor and disabled who have minimal financial assets.
Commonwealth Care provides free or subsidized insurance to those who don't
qualify for MassHealth but have low to moderate incomes and no access to
insurance through work.

Overall, spending on the healthcare initiative will total about $1.95 billion
this year. Slightly less than half of that will be funded by the federal
government, with the rest coming from state taxpayers and other sources.

The state's top two legislative leaders, faced with the
prospect of soaring costs for the healthcare initiative, are considering raising
the cigarette tax as one of several funding and cost-cutting strategies.

Both House Speaker Salvatore F. DiMasi and Senate President Therese Murray said
a tax increase would be discussed as they look for ways to ensure that the
universal health insurance initiative succeeds....

In fiscal 2009, a $1 increase in the cigarette tax would nearly cover the
state's share of the cost. In future years, the cigarette tax would make a
smaller dent in offsetting the growing expenses....

DiMasi, Murray, and Patrick all continue to strongly support the insurance
initiative, despite its rising costs.

Local health officials are applauding the proposal as a
public health measure that could encourage people to cut back on smoking or quit
all together.

"I know from over 15 years experience in the field, there is a relationship
between the cost of purchasing cigarettes and the degree to which (smokers) will
purchase them," said Marianne DeSouza, director of the New Bedford Health
Department....

But it's a double-edged sword. If the tax is so effective in decreasing smoking,
it eventually won't be enough to cover the expenses of the health care
initiative, and legislatures will have to look to all taxpayers, not just
smokers, to pick up the slack.

"We're definitely opposed to the tax because in the long run we're going to all
be paying it," said Barbara Anderson, executive director of Citizens
for Limited Taxation, a group that works for lower taxes and smaller
government statewide.

According to the Executive Office of Health and Human Services, smoking-related
health care expenditures across the state totaled $3.9 billion in 2004. Health
care officials cite the high number as a reason for smokers to pay for the
health care initiative.

But smokers tend to die early and aren't a so-called drain on the health care
system for very long, Ms. Anderson said.

"They die before they get Alzheimer's," she said. "They die from a disease that
progresses very quickly."

House Speaker Salvatore DiMasi on Tuesday proposed a net $204
million in corporate taxes and a $1 per pack hike to the cigarette tax, part of
a package of cuts and revenue increases he said would close the looming $1.3
billion budget deficit....

The cigarette tax increase is aimed at reducing smoking and helping to fund
growing taxpayer costs associated with the 2006 law expanding access to health
insurance.

To hold down state costs, officials are considering
raising premiums as much as 14 percent and doubling some copayments for
the subsidized insurance program that is at the heart of healthcare
reform....

The proposed increases might be modified or avoided if insurers lower
their prices for covering enrollees in the next fiscal year or if the
state finds other sources of revenue.

Well, in just 48 hours the cost for individual insurance has
increased from an intended "$200" to $325. (Remember when I recently
said, "The devil, after all, is always in the details.")

The state will still penalize those employers who do provide
healthcare insurance to their employees, $62-each for doing so.

And as we in greater-Boston certainly should have learned, the
Robert Moses philosophy of government spending again confronts us:
First dig the hole; then worry about filling it in someday.

"To Moses' critics, however, he will always be remembered for
believing that . . . 'if the ends don't justify the means, what
does?'"

In my
Commentary of Apr. 16, 2006 I wrote: "This week's Wall Street
Journal editorial warned that this healthcare debacle was sure to lead
to 'higher taxes and more government intervention down the road.' As
with the law's estimated cost, we didn't have to wait long for "more
government intervention" either."

The Wall Street Journal had opined: "So the state is forcing
people to buy insurance many will need subsidies to afford, which is
a recipe for higher taxes [my italics] and more government
intervention down the road."

Here we are, 2008 -- just two years after celebration
of its passage -- and the cost of our first-in-the-nation experiment is
rocketing through the stratosphere. The Best and Brightest on
Beacon Hill are caught unawares, we're supposed to swallow?

If they are, I'm not surprised all that much -- but
I'm too cynical to let them off that easily. They didn't have a
clue what it would eventually cost taxpayers, but low-balled the
expense. That is a given, it almost always is. But they knew
only too well -- especially after the Big Dig fiasco -- that first you
excavate the hole; then you worry about filling it when there's no
turning back. All the screw-ups will later be muddled, blame
redirected, and the old Mad Magazine's Alfred E. Newman "Who, Me?"
posters will spring up across the state.

"Why are you so cynical?" we were asked. How
were we so accurate, as usual? History is the answer.

So here they go again: Tax the smokers!
Charging those disgusting creatures for every ill in society, every
expense that can be even tenuously linked, is an easy sell. It
always has been; has always worked. So far, but for how much
longer can it?

This is nothing more than whistling past the
graveyard -- a more literal use of this metaphor has probably never been
made.

According to the tax-hikers, the "humanitarian"
purpose of hiking the cigarette tax by a buck a pack is allegedly to
encourage more smokers to quit. Baloney! It that ever
happens, the state would go bankrupt overnight from the loss of its
current tobacco excise tax revenue. As we wrote in
yesterday's CLT
News Release: "If all Massachusetts smokers were to
quit overnight, the state would lose over $400 million dollars. Why not
be honest and use some of the new revenue for ads encouraging young
people to start smoking for the good of state services?"

Actually, the revenue coming into state coffers
exceeds even that $400 million annually, thanks to smokers.

Don't forget the gigantic multi-state "Big Tobacco"
settlement of 1999, an alleged
taxpayer "reimbursement" of $207 billion, with Massachusetts reaping
its share of 7.6 billion over 25 years -- $250-$350 million annually.
Of course, Big Tobacco covered the settlement by increasing the cost of
cigarettes by 50¢ a pack -- which, seeing that coming, is when I quit.

In my Boston Herald op-ed column of Feb. 21, 1999 ("Smoke
and mirrors deprive taxpayers of tobacco money") I wrote: "The
$250 - $350 million each year the state is scheduled to recover from the
settlement for at least the next 25 years, added to the $100 million
annually paid by smokers above the cost of state-provided health care to
them, brings the state's yearly tobacco revenue bonanza to some $400
million." Since then, there have been a couple more tobacco tax
hike whacks taken on smokers.

So, contrary to hyperbole, smokers are statistically
not a net drag on the state's cost for health care but a net
profit and have been -- but they
are an easy immediate target in times of immediate revenue need. But that
revenue smokers provide isn't infinite -- especially if the state's
intended goal is to "reduce smoking." Reducing the purchase of
cigarettes in Massachusetts reduces state revenue. Do you buy that
alleged "humanitarian" goal for a moment?

As we said in our news release yesterday: "Why
not be honest and use some of the new revenue for ads encouraging young
people to start smoking for the good of state services?"

Important to be aware of is how easily taxpayers can
be divided and ultimately conquered -- the primary reason for CLT's
long-established opposition to a Graduated Income Tax. Once
any minority taxpayer group or subdivision of revenue source can be
identified and herded out, it's oh so easy to victimize them one-at-a-time -- then move on to another next class. "United we stand,
divided we fall."

Spending on the state's landmark health insurance initiative would rise
by more than $400 million next year, representing one of the largest
increases in the $28.2 billion state budget the governor proposed
yesterday.

The biggest driver of the cost increase is projected growth in the
number of people signing up for state-subsidized insurance, which now
far exceeds earlier estimates.

State and federal taxpayers are expected to bear nearly all of the
additional cost.

Although the price tag for the initiative is ballooning, the governor
yesterday reaffirmed the state's commitment to ensuring that nearly
every resident is covered.

"We have fully-funded healthcare reform," Governor Deval Patrick said at
a news conference. Patrick listed the initiative among several programs
started by previous administrations that he supports.

But the long-term cost of the insurance initiative continues to concern
policy makers and analysts, who are worried that it may become
unaffordable.

"These increases are more than anticipated, so we absolutely have to
find ways to hold down the rate of growth in future years," said Michael
Widmer, president of the Massachusetts Taxpayers Foundation, a
business-funded budget watchdog that has supported the initiative.

This year the state is expected to exceed the initial budget for the
health insurance initiative by about $245 million, and next year's
budget would boost spending by another $400 million.

The budget now goes to the Legislature, which last year accepted the
governor's recommendations on funding the health insurance initiative. A
final budget is expected to be approved by the end of June.

The state's top budget official, Leslie Kirwan, said yesterday that
projecting costs for the health insurance initiative is difficult
because the state is in "uncharted territory."

"We're ultimately working with a lot of uncertainty about the number of
uninsured that remain out there in the population," said Kirwan,
secretary of administration and finance and chairwoman of the state
panel overseeing the health insurance initiative. "Every significant
decision we've made in healthcare reform" that draws on enrollment
projections is based on "our best educated guess."

The administration is currently working to develop a better way to count
the uninsured.

When the law mandating that nearly all Massachusetts residents have
health insurance was signed into law by then-governor Mitt Romney in
April 2006, the state estimated that about 400,000 residents were
uninsured.

Census estimates of the uninsured were far higher - about 650,000 - and
many independent observers suggest that the truth lies somewhere in
between.

Officials had projected that about 140,000 would enroll in the new
state-financed insurance plan, called Commonwealth Care, which provides
full or partial subsidies.

But by the end of last month, 169,000 people had signed up for
Commonwealth Care, and the state is now estimating enrollment will reach
225,000 by June 2009, the close of the next fiscal year.

More than 70,000 have obtained Medicaid coverage since the law passed
expanding eligibility, and the cost for covering those additional
people, plus rate increases for hospitals, doctors, and others, is
projected to grow significantly above this year's spending.

Those who don't qualify for subsidies or Medicaid are expected to buy
private insurance or remain uninsured. Illegal immigrants are not
subject to the insurance mandate or eligible for state insurance, but
they can qualify for free care.

When the initiative was approved, the state expected that over time
there would be a significant drop in spending on healthcare for the
uninsured. The initial funding plan counted on shifting a significant
portion of those "free-care" costs to pay for insurance subsidies.

But that shift is not going to happen to any large extent in 2009,
according to the proposed budget.

To fund the overall increases, the state is counting on getting about
half from the federal government. But officials have just begun
negotiations on how much Massachusetts will actually receive.

Patrick said he is optimistic about federal support, but acknowledged
that "nothing is certain."

Separately, the state is counting on $5 million in revenue from
businesses that don't provide insurance for their employees, down from
the $24 million included in this year's budget that has not
materialized.

The subsidized insurance program at the heart of the state's healthcare
initiative is expected to roughly double in size and expense over the
next three years - an unexpected level of growth that could cost state
taxpayers hundreds of millions of dollars or force the state to scale
back its ambitions.

State projections obtained by the Globe show the program reaching
342,000 people and $1.35 billion in annual expenses by June 2011. Those
figures would far outstrip the original plans for the Commonwealth Care
program, largely because state officials underestimated the number of
uninsured residents.

The state has asked the federal government to shoulder roughly half of
the program's cost from 2009 through 2011, but there is no guarantee of
that funding. Commonwealth Care provides free or subsidized insurance
for low- and moderate-income residents.

"The state alone cannot support that kind of spending increase," said
Michael Widmer, president of the Massachusetts Taxpayers Foundation, a
business-funded budget watchdog group.

Even with federal backing, the state may not be able to afford the
insurance initiative as designed, because the law did not make any
attempt to trim wasteful health spending, said Alan Sager, a Boston
University professor who specializes in healthcare costs.

Currently, 169,000 people have enrolled in the program, which is
expected to cost $618 million in the fiscal year ending June 30. When it
authorized the program in 2006, the Legislature estimated that about
215,000 people would eventually be enrolled at a cost of $725 million.
State officials in late 2006 reduced that estimate to between 140,000
and 160,000 - a number that was surpassed last year.

"We're paying the price of our own success," said Widmer.

The administration of Governor Deval Patrick produced the new estimates
to launch negotiations for federal funding, and has shared them with
some state health leaders at closed-door meetings. Patrick is seeking
about $1.5 billion over three years, half the cumulative cost for
Commonwealth Care. The administration declined to discuss the numbers or
the assumptions behind them, citing the ongoing negotiations.

In a statement, however, the governor's spokesman, Joseph Landolfi,
said, "It is clear that paying for healthcare reform will pose a much
greater fiscal challenge than was anticipated by the previous
administration. We are committed to making health reform a success by
aggressively pursuing cost savings and efficiencies in the healthcare
system, as well as working with legislative leaders to review options
for additional state revenues so that we can continue to afford this
important initiative."

The expanding need for new state and federal money is in sharp contrast
to the statements made by former governor Mitt Romney, when he proposed
the initiative in 2004 and as he campaigns for president. He has
repeatedly suggested that the state could insure low-income residents
largely by reallocating money paid to hospitals and health centers that
serve the uninsured.

"The bill that I submitted to the Legislature didn't cost $1 more than
what we were already spending," he said Wednesday night during a GOP
debate. "However, the Legislature and now the new Democratic governor
have added some bells and whistles."

In fact, Romney signed the law in 2006 as modified by the Legislature,
approving most of the changes, but vetoing a few provisions that were
overridden. Lawmakers then estimated that the initiative would cost the
state only a small amount of new money in the first few years. It is now
apparent that both Romney and lawmakers underestimated the cost of
insurance subsidies as well as other parts of the initiative, largely
because they based their projections on low estimates of the number of
uninsured and the rising price of insurance. When the law was passed,
neither Romney nor the Legislature estimated the costs beyond next year
because they believed the enrollment growth would be all but complete.

From the beginning, many health policy specialists said the initiative
would cost the state more than expected. Now, some say, the benefits of
reaching near-universal insurance coverage may counterbalance the
financial pain.

"I wouldn't say there's an imminent danger that the whole thing is going
to collapse," said Robert Seifert, senior associate at the Center for
Health Law and Economics at the University of Massachusetts Medical
School. "It's challenging, but if it's a priority for the
administration, then I think it's doable. There are benefits that don't
appear in the budget numbers," including healthier residents, who are
less of a financial drain in the long run.

Government-funded costs of another part of the insurance initiative -
expansion of the state's Medicaid program, called MassHealth - are also
projected to grow significantly. The state is also seeking federal
reimbursement for half of those expenses.

MassHealth covers the poor and disabled who have minimal financial
assets. Commonwealth Care provides free or subsidized insurance to those
who don't qualify for MassHealth but have low to moderate incomes and no
access to insurance through work.

Overall, spending on the healthcare initiative will total about $1.95
billion this year. Slightly less than half of that will be funded by the
federal government, with the rest coming from state taxpayers and other
sources.

If the state doesn't get all of the federal funds it is seeking, policy
makers could face difficult choices: spend more state money or cut back
the two programs by reducing enrollment, cutting subsidies, or
eliminating benefits.

"We need that [federal money] to be able to continue the effort to
provide MassHealth and Commonwealth Care to everyone who is eligible,"
said Thomas Dehner, director of MassHealth.

Dennis Smith, the federal official who will negotiate the details of the
federal contribution, declined to comment about the state's request for
more money.

The federal government has supported that state's insurance experiment
so far - contributing about $300 million for Commonwealth Care since it
began in October 2006 and millions more for other parts of the
initiative. But the Bush administration has also been trying to curb
federal spending in the Medicaid program, which would be the source of
the new money Massachusetts is requesting.

Negotiations on the state's latest funding request are expected to wrap
up by July 1.

The financial pressures come as the state struggles to balance the
budget for next year, and as the federal economy appears headed for a
downturn. The budget proposed by Patrick on Jan. 23 included money for
the first wave of the projected increase in Commonwealth Care - $869
million, a figure some observers suggest may itself be too low because
of growing enrollment and healthcare costs. The budget counts on the
federal government paying less than half of that total.

There has been no discussion of a tax increase to pay for the healthcare
plan.

One architect of the initiative said the state should work to build
public backing for the measure.

"I hope that the citizens of Massachusetts are willing to provide the
support to maintain our status as the only place in the nation that
offers universal coverage," said Jonathan Gruber, an MIT economist.

Two sources of money that were part of the original financing plan have
fallen short, contributing to the budget crunch. As more uninsured
residents were covered, the state had expected to shift hundreds of
millions of dollars from free care to insurance subsidies, but the drop
has been slower than predicted.

Lawmakers had also counted on collecting tens of millions of dollars
from businesses that do not insure their workers. But the Romney
administration reduced the number of businesses subject to penalties,
and the state expects to collect only about $5 million from them this
year.

Sager suggested that the state look to another source to make up the
difference: multimillion-dollar payments to hospitals that were included
in the law to win political support.

"It would be tragic to renege on the law's promises to cover all
citizens of the Commonwealth, especially if those promises can be
redeemed by . . . repealing the ill-targeted, unnecessary, and
unaffordable Medicaid rate increases to hospitals that are already
enormously profitable," Sager said.

The state's top two legislative leaders, faced with the prospect of
soaring costs for the healthcare initiative, are considering raising the
cigarette tax as one of several funding and cost-cutting strategies.

Both House Speaker Salvatore F. DiMasi and Senate President Therese
Murray said a tax increase would be discussed as they look for ways to
ensure that the universal health insurance initiative succeeds.

Healthcare advocates have proposed a $1 per pack tax increase that would
raise an estimated $152 million a year, according to an analysis by the
Campaign for Tobacco-Free Kids, a Washington advocacy group. Neither
DiMasi nor Murray, who spoke in separate interviews Monday, has endorsed
that specific proposal.

The top lawmakers said they would consider stiffer penalties on
businesses that fail to insure their workers as a means to raise
additional funds. And they are seeking ways to reduce healthcare costs,
short of cutting back the health insurance initiative.

"We've made a commitment [to the healthcare initiative], and we have to
keep it," Murray said. But, she added, "Everything should be on the
table for discussion" in how to fund it.

The Globe reported Sunday that annual costs for the subsidized insurance
program at the heart of the initiative are projected to double over the
next three years, reaching $1.35 billion by June 2011.

Lawmakers are also working to address a more immediate issue, an
increase of about $400 million in healthcare spending included in
Governor Deval Patrick's proposed fiscal 2009 budget. In the budget,
nearly $160 million of that increase would come directly from state
taxpayers, with most of the rest coming from the federal government.

In fiscal 2009, a $1 increase in the cigarette tax would nearly cover
the state's share of the cost. In future years, the cigarette tax would
make a smaller dent in offsetting the growing expenses.

When campaigning for governor, Patrick endorsed a proposal that would
have increased the cigarette tax to help fund universal health
insurance. That proposal was dropped in favor of the initiative now in
place. Patrick declined to comment yesterday on a cigarette tax
increase.

DiMasi, Murray, and Patrick all continue to strongly support the
insurance initiative, despite its rising costs. More than 300,000 state
residents have insurance, and the coalition of health advocates,
business leaders, hospital officials, and politicians that came together
to push the initiative is holding strong.

"I don't think there should be any retreat," said DiMasi.

The House speaker also said he was not convinced the costs would rise as
much as the Patrick administration has predicted, because more efficient
and higher-quality healthcare would offset some of the growth in
expenses. Most of the cost increase is based on a predicted doubling of
enrollment in a state-subsidized plan.

"In the long run, I hope most of the costs will stabilize," he said.

An increase in the cigarette tax is being actively investigated as a
revenue source in case it is needed, DiMasi said.

"It's probably an initiative that can work both ways: raise money and
discourage young kids from smoking," he said. "I would direct that right
to healthcare."

Murray is also working on a comprehensive plan to reduce healthcare
costs in the state through strategies that include streamlining of
billing, expansion of primary care services, and hearings on insurance
rate increases.

The state last raised the tax in 2002, by 75 cents. Including the tax, a
pack of cigarettes now typically costs between $4.50 and $5.50.

A bill to raise the tax by $1 per pack for the healthcare plan and
tobacco cessation programs has languished in the Legislature for the
last year.

House leaders briefly considered a smaller cigarette tax increase in
2005 to help fund an overhaul in healthcare before rejecting it in the
face of strong opposition from Senate President Robert E. Travaglini and
Governor Mitt Romney.

Any attempt to increase the tax now would be strongly opposed by the New
England Convenience Store Association, which represents about 1,000
stores in Massachusetts.

"It's an incentive for our customers to purchase cigarettes over the
border [in New Hampshire] or on the Internet," said Diana O'Donoghue,
the association's executive director. "Our retail sales will suffer."

Besides the cigarette tax, lawmakers said they would examine the
penalties that businesses must pay if they do not provide health
insurance for many of their workers. The state expects to receive about
$5 million in revenue from the penalties next year, tens of millions
less than planned, because Romney weakened the regulations before
leaving office.

DiMasi said Patrick should strengthen the regulations to increase the
collections. Murray said she would turn to her Health Committee chairman
for advice on this issue.

Senator Richard T. Moore, chairman of the Committee on Health Care
Financing, said he would likely draft legislation to stiffen the
penalties if the administration doesn't change the regulations.

Health Care for All, a Boston advocacy group that supports the cigarette
tax increase, also suggests charging businesses that shift workers onto
the subsidized insurance program, said John McDonough, the group's
executive director.

"There are no sacred cows," McDonough said. "Everything is on the table
and has to be to ensure public confidence" in the initiative.

But Richard Lord, president of Associated Industries of Massachusetts
and a member of the state panel overseeing implementation of the
insurance initiative, said policy makers must be careful not to destroy
the compromise that enabled the state to launch the initiative in 2006.

"If we reopen some of those positions that were an integral part of the
agreement, it's hard to predict what the reaction will be," Lord said.

Arthur Dubay Jr. knows smoking cigarettes is an expensive habit. It
costs him $1,825 a year, one pack a day at $5 a pack. It's a fixation he
picked up at age 35, when he switched to smoking to kick an alcohol
addiction.

At 54, Mr. Dubay knows smoking has made him look older than his years.
But since it saved him from alcoholism, he won't quit. Now, a proposed
$1-per-pack state tax increase is being considered by House and Senate
leaders, and he isn't happy.

"I think it stinks," he said. "There's enough tax on it already."

Scrambling for a way to fund the state's health care initiative, House
Speaker Salvatore F. DiMasi and Senate President Therese Murray are
considering raising the tax on cigarettes, which is now $1.51 a pack.
Although they haven't signed on to a specific increase, health care
advocates are pushing for a $1 increase, which would raise an estimated
$150 million for subsidized health insurance.

Local health officials are applauding the proposal as a public health
measure that could encourage people to cut back on smoking or quit all
together.

"I know from over 15 years experience in the field, there is a
relationship between the cost of purchasing cigarettes and the degree to
which (smokers) will purchase them," said Marianne DeSouza, director of
the New Bedford Health Department.

The Standard-Times reported in November that New Bedford has one of the
highest smoking rates in the state — 31 percent, versus a statewide rate
of 19 percent. According to the Department of Health, from 1999 to 2003,
New Bedford, Fall River, Westport and Wareham were among the 20 percent
of towns and cities with the highest smoking rates.

Ms. DeSouza said the tax could help reduce smoking in the area and
prevent teens from taking up the habit, because they won't be able to
afford it.

"I think that since most of our health-related illnesses are associated
with smoking, it certainly would be beneficial."

But it's a double-edged sword. If the tax is so effective in decreasing
smoking, it eventually won't be enough to cover the expenses of the
health care initiative, and legislatures will have to look to all
taxpayers, not just smokers, to pick up the slack.

"We're definitely opposed to the tax because in the long run we're going
to all be paying it," said Barbara Anderson, executive director
of Citizens for Limited Taxation, a group that works for lower
taxes and smaller government statewide.

According to the Executive Office of Health and Human Services,
smoking-related health care expenditures across the state totaled $3.9
billion in 2004. Health care officials cite the high number as a reason
for smokers to pay for the health care initiative.

But smokers tend to die early and aren't a so-called drain on the health
care system for very long, Ms. Anderson said.

"They die before they get Alzheimer's," she said. "They die from a
disease that progresses very quickly."

Still, the health risks and the rising costs are enough to make New
Bedford resident Tim Harlow kick the habit.

"I'm in the process right now of quitting smoking myself," he said.
"Between health reasons and money, it's ridiculous."

After 20 years of smoking, he's finally cutting back, using nicotine
patches and weaning himself down to one pack a week.

In the meantime, he's avoided the cigarette tax by rolling his own. A
pack of cigarettes he makes from tobacco and papers costs him only
$1.25.

It's possible more smokers will choose this route or even travel to
other states to buy cigarettes if the incentive is high enough.

But Mr. Harlow is certain the tax is for the best if it spurs people to
quit.

"It should be another good incentive, I would think."

Others are convinced it's too late to change. Joanne Polk, 47, of New
Bedford said her boyfriend, now 38, has been smoking since he was 13
years old.

"He'll never quit," though she's not a smoker and has pushed him to give
it up. She knows he'll pay the tax, however high, until cigarettes kill
him.

"I said, 'I could see myself burying you,'" she said, as she walked into
a convenience store to get him another pack.

House Speaker Salvatore DiMasi on Tuesday proposed a net $204 million in
corporate taxes and a $1 per pack hike to the cigarette tax, part of a
package of cuts and revenue increases he said would close the looming
$1.3 billion budget deficit.

DiMasi said the House on Wednesday would vote on cancelling a scheduled
increase in unemployment insurance rates, which employers say would net
about $150 million in savings. And the North End Democrat announced
he’ll push for a more aggressive reduction in the corporate excise tax
rate than the one sought by Gov. Deval Patrick.

The speaker’s budget plan also draws $435 million from current and
future reserves, calls for $100 million in budget cuts, and another $253
million in “savings and reforms” proposed by Patrick, including
Patrick’s plan to increase health insurance contributions from state
employees. DiMasi also went along with $166 million in Department of
Revenue initiatives like increased tax law enforcement and revoked sales
tax exemptions.

The cigarette tax increase is aimed at reducing smoking and helping to
fund growing taxpayer costs associated with the 2006 law expanding
access to health insurance.

The announcement, made Tuesday with the speaker flanked by his
leadership team, hands a decisive political victory to Patrick, who had
sought to close what he called corporate tax “loopholes,” but been
frustrated by DiMasi’s resistance to generating new revenues.

“We disagree on maybe some principles, but, look, he should take this as
a victory,” DiMasi said. “There are, you know, corporate tax reforms in
here, with a balanced approach.”

The plan would deliver at least as much new local aid to cities and
towns as the budget proposal outlined last month by Patrick and, despite
the cuts in spending, would “maintain essential services,” according to
DiMasi’s team.

DiMasi said he was “skeptical still” about Patrick’s three-casino
proposal, and said the House budget would not rely on the casino
licensing revenues the governor would use to provide $88 million to
municipalities for transportation infrastructure projects, protect
cities and towns from a $124 million Lottery revenue shortfall, and
produce $88 million in property tax relief worth an average of $200 to
over 420,000 households.

Calling the outline “a balanced approach,” DiMasi said, “This budget is
somewhere in between a very dire budget and a budget that can’t rely on
additional investments in the things that we want.”

The actual House budget proposal is still weeks away from being
released, following a series of public hearings.

Along with $289 million in corporate taxes, short of the $297 million
sought by Patrick, DiMasi is pushing for a more aggressive reduction in
the corporate excise rate. Patrick wants to cut the rate from 9.5
percent to 8.3 percent over three years beginning in fiscal 2010. DiMasi
would trim it to 7 percent by fiscal 2011, beginning Jan. 1, 2009,
rendering neutral the overall revenue demands on corporations.

Asked about the rate cut, Patrick said, “I think we can find our way to
yes together.”

By blending the unemployment insurance rate freeze with the corporate
tax restructuring, DiMasi said the House was seeking an additional $54
million from businesses for the fiscal year that begins July 1.

Senate President Therese Murray confirmed Tuesday afternoon that the
unemployment insurance bill was among the items the Senate plans to take
up Wednesday afternoon. Asked if the Senate was in lockstep with the
House, she said, “I don’t know if we’re in lockstep. We’re still
discussing it.”

During an availability with reporters in his office, the governor
repeatedly deferred to the Senate, where the House budget will land once
it’s filed, likely sometime in April.

The evolving House proposal would pull $229 million from the state’s
Stabilization Fund, suspend a scheduled transfer of $107 million to the
fund, and divert $91 million in interest. DiMasi said those subtractions
would leave the fund, one of the nation’s healthiest, near $2 billion.

Hill veterans said that the speaker had found himself cornered, with
both Patrick and Murray hunting for new revenues through both corporate
taxes and casino revenues, the latter of which DiMasi branded
unrealistic for this budget cycle, terming himself “still skeptical”
about Patrick’s three-casino plan.

Privately, Patrick aides said they were thrilled with what they called a
strategic and policy retreat by the speaker. But DiMasi allies said many
of the provisions reflected DiMasi’s influences, and that talk of a
Patrick win was overblown.

“They’re just learning to start to declare victory,” said one House
aide, speaking on background, and pointing to smaller-scale agreements
last year on municipal pension and health care programs. “They’re
realizing that half a loaf or three-quarters of a loaf is still good.
It’s what this process is about.”

Patrick said the speaker’s concessions on corporate taxes would not
temper the dissatisfaction he has discussed repeatedly in recent weeks,
increasingly concerned over lack of progress on his life sciences,
casino, and bond bills.

He said, “I am going to remain impatient … What we need, what we owe the
people of Massachusetts, is engaging on these issues. We put a lot of
ideas on the table, the speaker and the House has responded on some of
them, and I’m very, very grateful for that. We are talking about still
others on which he has not made announcements yet, but that’s all good
news.”

The “check-the-box” and “combined reporting” reforms would prevent
companies from shifting taxable profits to out-of-state subsidiaries,
and from reporting under different statuses on their federal and state
tax forms. The administration argues the changes would chiefly affect
large employers rather than small businesses. Both were part of a
broader package of business tax reforms recommended by a commission
created last year to study Patrick proposals that failed in the House.

The two reforms were among those dropped from consideration when Gov.
Mitt Romney was in office, after legislators and the Romney
administration agreed the changes would hurt businesses. In 2004, former
Rep. Paul Demakis, a House liberal, attempted to work the combined
reporting reform into the House budget, but then-Revenue Committee chair
Rep. Paul Casey (D-Winchester) superseded that effort by convincing his
colleagues to relegate the proposal to a study commission.

The proposal marks a dramatic turnaround for the speaker, who has been
business’s top ally on Beacon Hill, and a growing recognition among
state leaders that the budget gap for fiscal 2009 cannot be closed
without difficult political decisions, including new revenues, budget
cuts and continued reliance on one-time revenues.

At a March 2007 speech to the Greater Boston Chamber of Commerce, DiMasi
declared Patrick’s corporate tax plans “off the table” for the current
fiscal year, saying, “I believe that any of these proposals that put
more of a burden on business are only going to be adversely affecting
our economy, and right now we don't need that.”

But DiMasi had studiously left himself wiggle room as the commission
deliberated, repeatedly declining comment on specifics while insisting
the state did not need additional revenues. On Tuesday, he disagreed
with a reporters’ suggestions that he had changed his mind.

Business groups hurried to endorse DiMasi’s plan, calling it reasoned.

John Regan, executive vice president for the Associated Industries of
Massachusetts, said, “Clearly, if we had complete control of the
discussion, we would not want to go down the combined reporting route,
because it is immensely complicated. It does sort of lend itself to
protracted discussions between the taxpayer and the Department of
Revenue.”

“I think the speaker has made an attempt to put a balanced package
together that deals with the Commonwealth’s need for a balanced budget
and a concern for what the economic climate would look like here in
Massachusetts,” he said. “One of our concerns is knowing exactly what
the combined reporting piece looks like, because it’s enormously
complicated and it’s not something that we want to leave to regulation,
so we definitely want to participate in the drafting of that piece.”

Organized labor and public program advocates hit DiMasi for looking for
a steeper excise rate cut. Unions worked late last year to kill an
earlier effort to stop the boost in unemployment insurance payments,
which companies pay on a per-worker basis. Following DiMasi’s lead,
Patrick put the plan back on the table last month.

Rebekah Gewirtz, director of government relations at the National
Association of Social Workers state chapter, said, “You’ve got the issue
of closing corporate tax loopholes, and we applaud the speaker … They
shouldn’t be dealt with at the same time. We think it’s an issue of
basic fairness. At a time when we’re struggling to meet the needs of
people in this Commonwealth, we should be investing in programs, instead
of giving a windfall to big corporations.”

DiMasi declined to speculate about where the $100 million in budget cuts
would take place, but called that figure “very realistic” as a
percentage of a roughly $28.2 billion budget. With legislative budget
hearings due to begin Thursday, the speaker said he had unveiled his
proposal Tuesday to beat the distribution of unemployment insurance
invoices and notify municipal officials of the House’s budget intents.

Senate Ways and Means chairman Steven Panagiotakos said he was unsure of
the size of the budget gap his committee will tackle, but said the only
way to fill it would be by “increasing revenue or making cuts or
utilizing onetime revenues.”

“We’re all going to have to make a stab at closing a sizable gap,” said
Panagiotakos (D-Lowell).

Seated next to DiMasi at the afternoon press conference, with Revenue
Committee co-chair Rep. John Binienda (D-Worcester) on the other side,
House Ways and Means chair Rep. Robert DeLeo (D-Winthrop) said the
budget hearings launched Thursday would entertain “the possibility of
other revenue enhancements or budget cuts.”

Tacking another dollar onto the cigarette tax, which DiMasi aides said
was among the region’s lowest, would add another $152 million, which
DiMasi wants dedicated to the state’s health care expansion. That law,
passed in 2006, is DiMasi’s signature legislative achievement, and one
where costs have continued to outpace projections.

“Smoking is not a healthy habit, and it’s a habit that leads to chronic
illness, which means we pay more in health care costs,” DiMasi said.
“So, hopefully, this is a deterrent for people who smoke.”

It’s not clear how the change would affect cigarette sales in border
communities or how the state would cope with the tax revenue impact of
reduced smoking while using cigarette tax receipts to pay for ongoing
health care costs.

The most recent change to the cigarette tax came with a 2002 doubling to
$1.51 per pack, producing a 64 percent revenue increase in its first
year to $451 million, according to the Department of Revenue. In fiscal
2007, state income from the cigarette tax was $438.1 million, roughly
$2.8 million more than the previous year.

Rep. Kay Khan (D-Newton) questioned why DiMasi turned to the cigarette
tax, which she called “regressive.” Khan said an alcohol tax package she
files annually, which next year would raise an additional $160 million
by raising the excise rate and revoking the sales tax exemption, has
repeatedly been rejected.

“The argument is always ‘Poor Joe Six-Pack’,” Khan said.

While the progressive groups rallied to rip DiMasi’s plan, business
groups said they were grateful even for places where his phrasing
differed from Patrick’s.

“We deeply appreciate the fact that the speaker didn’t use the term ‘tax
loopholes’,” said Regan, a former top House aide and state business
development official. “They’re not loopholes. These are significant
changes to the state’s tax code. And at least by acknowledging that and
trying to offset the impact of that with a reduced rate signifies an
appreciation on the House part that you need to worry about the economic
climate.”

State tax revenues are projected to increase 3.8 percent next fiscal
year.

Health plan rates may rise by 14%
State officials worry previously insured
may enter program
By Alice Dembner

To hold down state costs, officials are considering raising premiums as
much as 14 percent and doubling some copayments for the subsidized
insurance program that is at the heart of healthcare reform.

State officials said they want to ensure that the program, called
Commonwealth Care, does not collapse under the weight of soaring costs
or under a potential influx of residents whose employers drop coverage
because the program offers a better deal for their workers.

"If we're not only trying to insure the uninsured, but insure the
previously insured, that's going to blow the doors off," said Leslie
Kirwan, the state's top budget officer and chairwoman of the
Commonwealth Health Insurance Connector Authority board that oversees
Commonwealth Care.

But advocates and some members of the authority board that reviewed the
proposed increases yesterday said the hikes would price people out of
the program. In addition, advocates called them unfair when compared
with the 5 percent premium increase the state expects for unsubsidized
insurance plans.

"We think it undermines the very principle on which the reform stands,
to provide access to quality, affordable healthcare and to protect the
poor and the most vulnerable," said the Rev. Hurmon Hamilton, president
of the Greater Boston Interfaith Organization, a group of congregations
that advocates for healthcare access.

The proposed increases might be modified or avoided if insurers lower
their prices for covering enrollees in the next fiscal year or if the
state finds other sources of revenue. The state is currently negotiating
with insurers who are seeking far more than the state wants to pay.
Neither side would disclose the size of the gulf.

As proposed, the increases would affect about half of the 170,000
low-income people now enrolled in Commonwealth Care. The premium
increases would apply to those whose income is above 150 percent of the
federal poverty level and the copayment increases to those above 100
percent of the poverty level. State residents are eligible for the
program if their income is at or below 300 percent of the poverty level
and they do not have access to work-based insurance.

Under the proposal, the lowest premium would rise from $35 to $40 a
month, a 14 percent increase.

Jon Kingsdale, executive director of the connector, defended the
proposed Commonwealth Care premium increases of $5, $10, or $15 a month
as fair, adjusted for income, and far lower than most premium increases
in private insurance. Kingsdale said that the subsidized program and the
private insurance plans are completely different and that comparing the
increases was like comparing apples and oranges.

Connector staff members, who proposed the increases, said they could
help prevent the state plan from becoming so attractive that employers
drop coverage for their workers and send them to Commonwealth Care. The
state is already predicting that enrollment and costs for Commonwealth
Care could double over the next three years.

"If we're going to preserve political support and keep it economically
viable, we've got to maintain some comparability between the benefits
and contributions in Commonwealth Care and in the private market,"
Kingsdale said.

Several connector board members opposed the increases, while others said
they seemed reasonable and might be necessary to sustain the program.
The board is expected to vote in two weeks on whether to impose any
increases, after it reviews insurers' bids. "It's too extreme," said
Celia Wcislo, a board member and assistant division director of Local
1199 of the SEIU. She said the state should look to insurers and
hospitals instead to foot more of the cost.

In addition to the premium increases, copayments for office visits and
prescription drugs could rise by $5 or $10, and some enrollees could see
an increase in the total amount of out-of-pocket costs they must cover.

A Brockton mother of five children said those increases could make the
plan unaffordable for her family. Mona Divers pays $37 a month in
premiums for herself; the rest of her family has other insurance. With a
heart condition, high blood pressure, high cholesterol, and a thyroid
problem, she needs regular care and racks up copayments for office
visits and prescriptions. Her husband's income of about $23,000 doesn't
go very far, she said. The family is also paying off about $4,000 in
medical bills run up before she enrolled in the state plan. "Back in
September, when I signed up, I thought, 'Thank God I have Commonwealth
Care to help me,' " she said. If the cost increases, she added, "I don't
know if I'm going to be able to keep it up."

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